Japan FM: stable oil prices key to Iran sanctions

TOKYO 
Japan's top diplomat said Friday U.S.-proposed sanctions on Iran must be considered carefully, warning that the move could drive up global oil prices that would only benefit Tehran and hurt the global economy.

Foreign Minister Koichiro Gemba's caution stems from wider concerns within Japan, which is heavily dependent on imported oil and natural gas to meet its energy needs. Japan's oil requirement has increased even more since it shut down many nuclear plants in the wake of last year's tsunami and the nuclear crisis in Fukushima.

"We need to respond carefully and wisely," and Japan will finalize its policy in consultation with the U.S., Saudi Arabia and other countries, Gemba said during a joint news conference with visiting French Foreign Minister Alain Juppe.

Japan has been generally supportive of the moves by the United States and Europe to block Iran's ability to sell oil, the country's main export, in a bid to force it to abandon its nuclear program. Finance Minister Jun Azumi said Thursday that Japan would start reducing Iranian imports.

Tehran denies the West's allegation that the program is aimed at building nuclear weapons.

Gemba said Japan shares the world's concerns about that Iran's nuclear program is a "serious problem."

"We do understand that we need to maintain sanctions, but they must be carried out effectively," Gemba said.

"What's going to happen if oil prices surge is that sanctions will not be effective," Gemba said. "The higher oil prices, the more affluent Iran becomes," he said, apparently referring to the likelihood of some countries ignoring the sanctions and continuing to buy from Iran.

Rising oil prices could "have an adverse effect not only on the Japanese economy but also the entire global economy," he said, adding that his recent trip to the Mideast was made in anticipation of possible sanctions on Iran.

If implemented, the sanctions would bar financial institutions from the U.S. market if they do business with Iran's central bank.

Gemba said Iranian oil accounts for about 9 percent of Japan's oil import, having decreased from 500,000 barrels per day to 300,000 barrels per day over the past five years

Juppe, however, brushed off Gemba's concerns about oil prices, saying that similar sanctions against Libya in the past did not drive up oil prices and that it is usually possible to arrange for additional output from other oil producing countries to make up for the shortfall.

"Minister Gemba sounds extremely wary of higher oil prices, but I don't think that would necessarily be the case," Juppe said. "Once we had a similar situation with Libya but that didn't lead to higher oil prices. We also believe we can obtain oil from other oil producing countries."

He also said the impact from the suspension of transactions with Iran's central bank would be "minimal."

"I think we should prioritize what we consider a more pressing issue - the economy or nuclear weapons development. We have to decide which is more important," Juppe said.